State health care oversight lacking bids

James M. Odato

Published 12:20 am, Monday, March 7, 2011

The state pays United Healthcare billions of taxpayer dollars to run the state's health insurance programs, and no one will say why the company doesn't have to competitively bid for the work.

In addition, public employees in the plans have a vested interest because their share of the payments could be affected if the state is paying too much.

After weeks of inquiries by the Times Union about the terms of the benefit administration contracts and costs to taxpayers, state officials offered few clues as to why the no-bid system exists, suggesting the contracts are sort of evergreens that are extended without review. The Office of the State Comptroller said it doesn't have all the answers, but is trying to get them. An official said that OSC learned that major parts of United Healthcare's deals never got passed on to the comptroller for approval, contrary to what is supposed to happen.

As a result, First Deputy Comptroller Alexander "Pete" Grannis wrote to Gov. Andrew Cuomo's director of operations, Howard Glaser, on Thursday to express a concern about the lack of competitive bidding on the state health insurance programs' medical, hospital and dental benefit administration contracts. "We believe a decision to continue to procure without the benefit of competition is costly and unwise and violates State Finance Law," Grannis wrote. He said the Department of Civil Service is supposed to be in charge of those insurance benefits contracts. The packages cover 1.1 million current and retired state and local employees, who help pay premiums.

Emily DeSantis, a spokeswoman for the comptroller's office, said contract personnel from the office have been trying to get Civil Service officials to recognize deficiencies with the procurement process for years. She said the comptroller's office can report that the state paid the company $14.5 billion in the past eight years, but it cannot fully account for about $6.5 billion of the sum because it is tied to a deal that was awarded long ago and never came up for rebidding and has not been provided for inspection by the comptroller's office.

"Unfortunately, the Civil Service Commission never sent the contract to OSC for review despite repeated attempts by the comptroller's office over the years to review the contract," she said. "The comptroller's office has repeatedly urged Civil Service to rebid the contract." Civil Service did rebid the prescription drug and mental health services contract at OSC's urging, she said.

The commissioner of Civil Service during the past four years was Nancy Groenwegen. She recently became general counsel to Comptroller Thomas DiNapoli. In his response to Grannis, Glaser suggested Grannis call her, according to a letter released Sunday.

Glaser added that the Cuomo administration intends to reform procurement practices to enhance efficiencies. It may pursue cutting out middlemen for handling benefits. "The administration is committed to a different approach which utilizes competitive bidding in all situations in which it will provide lower costs, better services and maximum value to the state's taxpayers," Glaser wrote.

Audits of United Healthcare in recent years have turned up problems with the administration of some of the benefits. One found the state spending hundreds of thousands of dollars more than it should on prescription drugs. Officials with United Healthcare would not take questions on their work or respond to the issue of competitive bidding and referred inquiries to the Civil Service department. The state agency declined comment.

The OSC's Open Book website has information on contracts totalling almost $8.1 billion in value, showing the largest one, for the Empire drug plan administration, expiring at the end of this year. The big contracts for hospital, dental and medical Empire Plans for state and public employees don't show up on the OSC website, even though they involve billions of dollars, because the deals weren't forwarded to the comptroller, OSC officials said.

United Healthcare, based in Minnesota, spent $350,000 on lobbyists last year in Albany -- almost $320,000 to five New York firms and $32,215 for its in-house team. UHC and top officers gave $137,300 to Albany political campaigns since 2000, the bulk of it to Senate Republicans and Gov. David Paterson.